Will the changes to super affect me?

As you might have heard in the news, a number of changes are being made to Australia’s superannuation system. These changes will apply from 1 July 2017.

If you meet any of the following criteria, the changes are likely to affect you:

You make concessional contributions (such as salary sacrificing)

You make non-concessional contributions (extra contributions you make to super from your after-tax income)

You’re looking to make extra contributions to super in coming years

You have an existing retirement phase account with a total value of $1.6m, or your account is nearing this amount

You have an existing TTR (transition to retirement) income stream

You are qualifying to commence a TTR income stream

If you’re listed above or are worried about your super savings for the future, now is the perfect time to seek financial advice.

If you’re more of a visual person, check out this great video from the ATO that outlines the people that are likely to be impacted by the changes:

What changes are being made to the super system?

CUTS TO NON-CONCESSIONAL CONTRIBUTIONS (NCCs)

Current rules allow you to make non-concessional contributions of up to $180,000 a year, or $540,000 using the ‘bring-forward rule’ to combine three years’ worth of caps in a single year. But from 1 July 2017, the annual cap will be reduced to $100,000. That will reduce the maximum possible contribution under the bring-forward rule from $540,000 to $300,000.

What it means for you:

The coming months up until 1 July 2017 are your final opportunity to make the most of the higher caps, by adding as much as possible to your super.

CHANGES TO CONCESSIONAL CONTRIBUTIONS (CCs)

Currently capped at $30,000 a year for those under 50 and $35,000 for people aged 50 or more, concessional contributions will be limited to $25,000 a year for all super investors from 1 July 2017, regardless of age. This will impact you if you rely on salary sacrificing to boost your super.

What it means for you:

If you have sufficient surplus cash flow, you could use this opportunity to maximise CCs for amounts made before 1 July 2017 up to $35,000 for those who were 49 or over on 30 June 2016 and up to $30,000 for those under age 49.

$1.6 MILLION PENSION CAP

From 1 July 2017, there will be a $1.6 million transfer balance cap on the total amount of accumulated superannuation an individual can transfer into the tax‑free retirement phase. This cap will include the value of existing retirement phase income streams just before 1 July 2017. Subsequent earnings on balances in the retirement phase will not be capped or restricted. Accumulated super in excess of $1.6mil can be retained in a member’s accumulation account (with earnings taxed at 15%) or moved outside super.

What it means for you:

If you are already in retirement and as at 1 July 2017 have a balance in excess of $1.6 million, you will need to either transfer the excess back into an accumulation superannuation account or withdraw the excess amount from your superannuation.

TRANSITION TO RETIREMENT INCOME STREAM (TRIS) RULE CHANGES

From 1 July 2017, the Government will remove the tax exempt status of income from assets supporting TRIS. These earnings will now be taxed concessionally at 15 per cent. Individuals will also no longer be allowed to treat certain superannuation income stream payments as a lump sum for tax purposes.

What it means for you:

Earnings from assets supporting transition to retirement income streams will now be taxed concessionally at 15 per cent. This change will apply irrespective of when your transition to retirement income stream commenced.

Why do I need to seek advice?

As so often with super, the new rules are complex, and their impact on you depends on your unique circumstances and retirement goals. That’s why it makes sense to talk to a professional now, so you can be prepared when the changes take effect on 1 July 2017.

By reviewing your existing situations and arrangements, you can make changes now that will boost your super savings for the future. It is imperative to get in touch as soon as possible, as after 1 July 2017, some options for increasing your super savings will disappear.

A Financial Adviser at MG Financial Services will review your current arrangements, create strategies to boost your super before the changes, and put you in the best position for when the changes take effect. With years of experience and a deep understanding of the complex super system, we are well equipped to organise your super for the best retirement possible.

If you are more of a visual person the below video explains what non-concessional contributions are, how the rules will be changing on 1 July 2017, and why you need to act now to prepare for your future.

What is the next step?

The team at MG Financial Services are happy to extend an invitation to talk to you about the impact of the super reforms on your personal situation. We also welcome bookings for appointments to review your existing superannuation arrangements.

Please call us on 03 9523 6500 to arrange an appointment or phone chat with one of our Financial Advisers to keep your super simple.

The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

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MG Partners
PO Box 1002,
Elsternwick Vic 3185

Ph: 03 9523 6500Fax: 03 9523 6099
info@mgaccountants.com.au

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